In real estate, what is a "closing cost"?

A closing cost refers to the various fees and expenses that both the buyer and seller incur during the final stages of a real estate transaction, especially when financing the purchase of a property. These costs typically include loan origination fees, title insurance, appraisal fees, credit report fees, and any associated legal fees.

When a property is financed, the closing costs are necessary to facilitate the transaction and complete the sale, making them distinct from costs related to renting or ongoing operating expenses. Therefore, they specifically pertain to the legal and financial procedures involved in the actual transfer of property ownership, which is why the correct answer highlights costs incurred when a property is financed. All other options refer to different aspects of real estate transactions but do not capture the essence of closing costs in this context.